Your Father's Oldsmobile
Did you notice that our biggest industrial union went on strike this morning against our biggest car maker? You didn’t? Funny, investors didn’t notice either — GM stock hardly moved today — it was actually up for awhile.
Unless you are walking a picket line or working in a Mexican parts plant, the GM strike doesn’t matter. Indeed, nobody has the slightest reason to pay any attention to it. The UAW has taken its best shot against its biggest adversary — and nobody cares.
Besides, the strike is most likely a well-rehearsed charade – a necessary ceremony in order to get
concessions approved by the rank and file. What concessions? Mainly
the VEBA — a way to make retiree health care the UAW’s problem. (It’s
a neat trick — a huge liability for GM becomes an asset for the UAW).
Retirees hate this because a similar deal at Caterpillar came apart and
the fund ended up broke. GM will also get a two-tier wage, but it will only apply to new hires and there ain’t gonna be many of those.
Why would the UAW agree to these concessions? Because otherwise GM will declare bankruptcy and GM’s 400,000 retirees will be completely hosed.
Under these conditions, union leaders dare not settle before the
contract deadline. Indeed, the deadline must be extended several times
amidst marathon round-the-clock bargaining designed to create the
impression of desperate industrial combat — a knife fight between alpha males in wrinkled suits.
Psychodrama aside, according to the Wall Street Journal, UAW
membership at the Big Three is about 40% lower than it was during the
2003 labor negotiation. (Unfair comparison: Google was five years old
and had less than $200 million in revenue that year. Today, their market cap of $175 billion, is five times larger than the big three automakers combined).
When only 7.4% of private sector workers join unions, being the largest union just doesn’t matter (even
Democratic politicians now ignore unions — unless they are short of cash). Union decline is partly due to laws that make it
difficult to organize, but also caused by antediluvian union practices that
do little to help labor’s cause (details here, here, and here).
Like it or not, the UAW and GM are irrelevant. Plenty
of better companies employ American workers to make cars in the US. And
GM now sells most of its cars overseas anyway (China is the #2 market
after the US — Buicks are hot items).
During the coming days there will be much talk about the VEBA, competitiveness, and cost reduction. None of it matters
– this is a dysfunctional couple having the same sad feud they alway have — except now they are both dying. It will fall to others to decide the time and nature of the funeral.
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